Part 4: Relationships Between Portfolio, Program, Project, and Organizational Project Management

Before we go any further, we must first understand Organizational Strategy.

In any Organization, there is an Organizational Strategy. The strategy is the goal of the organization. It is the reason that the organization exists. It doesn’t matter if it is a small business, a big business, a non-profit, or a government department. There is always a strategy.

The strategy of a for-profit business is to make money.

A business can have other goals (like helping the community, improving its public image, or cleaning up the environment), but the ultimate purpose of these goals is to make the business more money. I don’t want to sound cynical. But when a business has investors or shareholders, its management is legally obligated to protect their financial interests (i.e. make them as much money as possible).

The strategy of a non-profit or a government might be to provide clean drinking water, reduce crime, improve educational opportunities, or create jobs.

Programs

Programs will be mentioned in the exam
A Program is a Group of related Projects, Subprograms, and Program Activities
Programs are managed together in order to obtain aggregate benefits that are not available from managing them individually
Projects in a program are related through a common outcome/capability
Program Management = Application of Knowledge, Skills, Tools, Techniques to meet the program requirements, and obtain benefits and control not available by managing projects individually
Projects with no common outcome, but a related client/seller/technology/resource should be in a PORTFOLIO, not a PROGRAM.
Program Management resolves project interdependencies
- Resource Constraints (when a resource is required by multiple projects)
- Organizational Goals/Objectives (ensures that all of the projects are aligned with the organization’s objectives)
What does that mean exactly? Let’s look at an example. Vortex is designing three new ovens. They will have the same brand name, but will have different features and will be sold at different price points. One oven will be cheap and basic. One will be intermediate. One will be expensive and fancy with many features. All of the ovens start with the same basic design.
The same engineering team designs each of the ovens. The same prototyping team builds and tests each of the ovens. The same procurement team sources parts for each of the ovens. They will be sold in the same stores (Home Depot, Sears, etc).

The design of each oven falls under a separate project. Vortex manages the oven design projects under the same program.

Why? Each oven design project has the same goal: to sell more ovens and make the company more money. All three projects share the same resources (engineering, prototyping, and procurement). The program can manage these resources so that efforts are not repeated.
What is similar about each oven?
- All the ovens require steel. If Vortex had three separate oven projects, they would have to procure the steel separately for each project. Under a program, Vortex can procure all the steel for all the ovens under one program. This saves time and allows Vortex to negotiate a better price on the steel with the steel supplier.
- Although each oven is different, some of the components will be the same. For example, all three ovens have the same oven door, oven door hinges, lights, power plugs, paint, and wheels. If Vortex had three separate oven projects, they would have to design each of these components three times. Under the program, Vortex can save engineering labor by designing the components once.

Portfolio

Portfolio = Set of Projects, Programs, Subportfolios, and Operations
A Portfolio is managed as a group to achieve Strategic Objectives for an organization
Projects/Programs inside a portfolio don’t have to be directly related
Portfolio Management = Central Management, consistent and aligned with organizational strategies
What kinds of strategies benefit from Portfolio Management?
- Attempt to meet Market Demand. For example, customers are demanding energy efficient appliances, so Vortex forces all portfolio design projects to integrate energy efficient designs. Vortex also forces marketing projects to advertise the energy efficient designs.
- Strategic Opportunity/Business Need. For example, the Chinese government announces that it is opening its appliance market to a limited number of foreign manufacturers. Vortex forces the portfolio projects to speed up design so that the appliances can be introduced into the Chinese market.
- Social/Humanitarian Need.
- Compliance with an Environmental Regulation. For example, the government mandates that appliances sold after a certain date can’t contain harmful chemicals. Vortex must change the design of all its new appliances to meet the new regulation. Vortex forces the new design across all new projects.
- Customer Request. For example, Vortex supplies appliances to Hilton hotels. Hilton demands that all new appliances installed in their hotel rooms have stainless steel shelves. Vortex forces all new appliance designs to include stainless steel shelves as an option.
- Technological Advances. For example, Vortex discovers a way to replace traditional oven heating elements with low-energy LEDs. Vortex begins integrating LEDs in all new design projects.
- Legal Requirement. For example, the Vortex is sued by a competitor. The suit claims that Vortex’s oven door hinges infringe on the competitor’s patent, and Vortex is found liable. Vortex is required to change the design of its oven door hinges to avoid paying further damages.
Each project can have discrete benefits and contribute to the program/portfolio
Organizations manage Portfolios with their strategic plan in mind
- An organization seeks to maximize the value of the portfolio
Organizational strategies and priorities are linked to Portfolios
Organizational planning impacts Projects by prioritizing risk and funding to align with the strategic plan. An organization directs resources to Projects that meet its strategy.
An organization can shut down a project if it no longer aligns with the Organizational Strategy. This happens often, and there is nothing wrong with it.
For example, Vortex designs ovens & televisions, which are sold in Home Depot. The oven design team is separate from the television design team. The projects have the same goal: to design a product that makes money. Home Depot is the common client that links the projects.

If Vortex is designing multiple ovens and multiple televisions, the oven projects will be part of a program, and the television projects will be part of a program (due to shared resources). The oven program and television program can be part of the same portfolio.

An oven project and a television project won’t be part of the same program.
Vortex’s Organizational Strategy is to make money. If it starts losing money on television sales, it can shut down the television program (or possibly some of the television projects) and divert the resources towards the design of another appliance.

An organization has several layers of management.

At the top is the Organizational Project Management, below that is the Portfolio Management, below that is Program Management, and at the bottom, there is Project Management

Portfolio, Program, and Project Management are driven by Organizational Strategy

Organizational Project Management (OPM)
- OPM is the highest level of management in an organization
- Allows organization to Consistently and Predictably Deliver Organizational Strategy
- OPM is a framework for executing the strategy
- Produces Better Performance, Better Results, and a Sustainable Competitive Advantage
- OPM uses Project, Program, and Portfolio Management
- OPM uses Organizational Enabling Practices
- For example, Vortex will use OPM to manage all of its design, marketing, and procurement operations.
Portfolio Management
- Portfolio Management means selecting the right Programs or Projects, or prioritizing specific programs and projects to obtain specified benefits, which align with the Organizational Goals
- For example, Vortex reviews its sales and identifies that toasters and ovens are the most profitable appliances. Vortex reviews its customer feedback and identifies that customers prefer energy efficient appliances. Vortex will use Portfolio Management to prioritize the development of energy efficient appliances, toasters, and ovens.
Program Management
- Program Management harmonizes Projects & Programs
- Program Management allows an organization to control Project Interdependencies to obtain Benefits
- As explained earlier, Vortex has one engineering team working on multiple oven design projects. The engineering team is an interdependency. Vortex uses Program Management to prioritize the engineers across multiple projects. Having multiple design teams each work on a separate oven design would be inefficient. They would have to “start from scratch” for each design and would not be able to learn from their mistakes.
Project Management
- In Project Management, plans are developed to achieve a scope
- The “scope” is the result that we expect to end up with
- The scope should meet the objective of the programs
- Ultimately, the scope is subject to Organizational Strategies
- Program Management approves projects
- Program Management cancels projects
- For example, Vortex uses a project to design a single energy-efficient oven. The scope is the final design of the oven. Vortex’s organizational strategy is to manufacture energy-efficient ovens. Therefore, the project scope should state that the oven will be energy-efficient.

Summary of Project, Program, and Portfolio Management

	Project	Program	Portfolio
Scope	Defined scope	Larger Scope	Organizational Scope, aligned with Organizational Strategy
Change	Expect change	Expect change inside and outside the program	Monitor changes in the environment
Planning	Progressive Elaboration	Overall Program Plan to guide planning	Create/Maintain Processes/Communication
Management	Manages Project Team	Manage Program Staff and Project Managers	Manage Portfolio Staff or Program and Project Staff
Success	Product/Project Quality, Budget, Timeliness, Customer Satisfaction	How the program satisfied the needs of the organization	Investment Performance and Benefit of the Portfolio
Monitoring	Monitor/Control Work of Producing Product	Monitor Program components to ensure overall goals	Monitor Strategic Changes and Aggregate Resources, Performance Results, Risk

Project Management Office (PMO)

The Project Management Office (PMO) standardizes Project Governance, Sharing of Resources, Methods, Tools, and Techniques
There are many types of PMOs; each organization can assign different responsibilities to its PMO
Types of PMOs
- Supportive
  - Provides templates, training & best practices to other projects
  - This is the weakest type of PMO, and it is basically a project repository
- Controlling
  - Provides support & compliance
  - Control is moderate
- Directive
  - Directly manages projects
  - Control is high
PMO collects data from projects to evaluate if the strategic objectives are being fulfilled
The PMO acts as a liaison between Portfolios, Programs, Projects, and the Organization
A PMO might be a stakeholder or decision maker
A PMO supports project managers by
- Managing shared resources
- Developing project management methods, best practices, and standards
- Providing coaching, mentoring, training, and oversight
- Ensuring compliance with project management standards, policies, procedures, and templates
- Developing & managing policies, procedures, templates, and documents
- Coordinating communication between different projects
The Project Manager and the PMO have different objectives
- Project Manager focuses on his or her specific project objectives, while the PMO focuses on the objectives of the programs
- Project Manager controls project resources, while the PMO optimizes shared resources across all projects
- Project Manager manages constraints of his/her project, while the PMO manages methods, standards, and risks for all projects